Asian Markets Wobble as AI Fears Clash with US Tariff Uncertainty

The dual-pronged pressure of legal volatility in Washington and the "second wave" of artificial intelligence disruption has sent ripples through Asian markets, forcing a recalibration of risk across both the industrial and technology sectors. On one hand, the US Supreme Court’s decision to strike down a significant portion of President Donald Trump’s tariff policy—specifically his use of a particular act to impose sweeping levies—has introduced a new layer of legal complexity to global trade. While the administration has already pivoted to alternative legal authorities to maintain many of these tolls, the ruling has created a "clarity gap" that is now stalling international agreements.

The European Union’s decision to pause the ratification of its latest trade agreement with the US underscores the fragility of the current trade environment. Investors are closely watching whether this legal setback for the White House will lead to a period of "tariff-based friction" rather than the outright upheaval seen in 2025. Japan’s quick move to reaffirm its commitment to existing pacts suggests that some major economies are prioritizing stability over the potential to renegotiate in the wake of the court’s ruling. However, Trump’s social media warnings—threatening even higher tariffs for countries that "play games"—ensure that the threat of protectionism remains a primary driver of market sentiment.

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The European Union’s decision to pause the ratification of its latest trade agreement with the US underscores the fragility of the current trade environment.

Simultaneously, the technology sector is grappling with a shift in the AI narrative from "growth engine" to "disruptive threat." For much of the past two years, AI was viewed primarily through the lens of hardware demand—benefiting firms like Samsung and SK hynix. However, a new report from Citrini Research has pivoted the focus toward the potential for AI to cannibalize existing business models. The report highlights credit card companies and food delivery platforms as being at high risk from new automated tools. This shift in sentiment suggests that the "easy money" phase of the AI rally may be over, as investors begin to identify the specific industries that could be automated out of relevance.

Perhaps most significant for the enterprise software space is the announcement from Anthropic regarding its Claude chatbot’s ability to update the COBOL programming language. COBOL remains the backbone of legacy systems for thousands of global financial institutions and government agencies, many of which run on IBM infrastructure. Historically, the difficulty of migrating away from COBOL provided a "moat" for legacy IT service providers and software firms. If AI can now reliably modernize this code, it threatens to disrupt a multi-billion dollar maintenance and consulting industry. This development has placed software firms in the "firing line," as the cost and time required for digital transformation could plummet, potentially eroding the pricing power of traditional IT giants.

Looking ahead, the market’s resilience will depend on whether the macroeconomic "ends" of trade policy remain stable despite the shifting legal "means." As Michael Brown of Pepperstone noted, the overall impact on growth and inflation may be minimal if the administration successfully migrates its tariff regime to new legal foundations. However, the intersection of trade uncertainty and AI-driven structural shifts in the labor and software markets suggests that 2026 will be a year defined by micro-level volatility. Investors should prepare for a "K-shaped" recovery within the tech sector, where hardware providers continue to see demand while legacy software and service-oriented firms face unprecedented margin pressure.